Refinance trouble on attempted BRRR

[Dave Hurt]

Hello folks! 

I posted about this in the PRO forum and didn't get much response so I figured I'd post it here as well.  

I was just denied a conventional cash-out refinance on a rental property that I acquired all-cash and almost meets the 2% rule!

I own a business and I have a W-2 job.  My business owns and operates restaurants.  In 2015 we opened a new restaurant, so my CPA took advantage of bonus depreciation on the new restaurant to reduce my tax burden.  As we all know, depreciation on assets such as real estate, restaurant equipment, etc. is a wonderful tax strategy, and one of the many reasons it is beneficial to invest in these asset classes.

Now, here's the frustrating part - the underwriters are counting the bonus depreciation as a cash loss against my W-2 income and are saying I don't have enough income for the loan (the W-2 income from my 'day job' is six figures, and the only personal debt I have is my primary residence and a vehicle!!!).  

My CPA  put together a letter describing that the 'loss' was depreciation and that it was not an actual cash loss that should flow through to my income, and that I have more than enough income for this loan.  I even provided my company's P&L and balance sheet to show that we have strong financials.  The underwriters won't budge.

This is incredibly frustrating as it is a property that I'm into for only 55k, the bank appraised it at 90k, and I have it leased out on a yearly lease for $900/month!  This is the safest loan a bank could possibly make!  I have a high-paying stable job, strong credit, and low personal debt...I just also happen to own a business that took a large bonus depreciation for FY15 (NOT A CASH LOSS!).

Does anyone recommend a lender who can properly underwrite this?  I don't want to keep paying for appraisals and getting denied because underwriters are counting my business depreciation against my W-2 income!

Thank you and sorry for the long post!

[Bill Tilt]

If things are as you say, you should be able to find a bank that will give you the loan. Keep knocking on doors and you will find it. I always have relationships with at least three local banks for these kind of situations.